Zambia’s decision to cut subsidies on maize and remove a fuel subsidy is likely to hamper output of the staple grain, raise prices and dash its goal of becoming a regional breadbasket.
The southern African country reduced a subsidy on fertiliser to 50 percent from 75 percent, so farmers will now pay more for the vital input.
The government also halted a practice that saw it buy maize from farmers at inflated prices, which it resold to millers at lower-than-market prices to keep a lid on food inflation.
Citing higher subsidy costs, Lusaka said it will now only buy maize for strategic reserves. This comes after the country in April removed a subsidy on fuel, leading to a more than 21 percent hike in fuel prices.
Zambia became a hot destination for regional buyers looking for maize after bumper harvests were reaped from the subsidies and good farming practices.
In a remarkable turnaround for one of the poorest countries on Earth with a fast growing population, Zambia went from being a maize importer to exporter, as output rose to more than 2.5 million tonnes from about 600,000 tonnes just over a decade ago.
Farmers now fear higher farm input and fuel costs will weigh on profits and hurt output.
“Our production costs are very high. The cost of borrowing is also very high, you can’t risk borrowing to grow maize when you are not guaranteed a good price,” said Request Muntanga, a farmer in Kalomo, 370 km (220 miles) south of Lusaka.